TSX: CWEB | OTCQX: CWBHF BUILDING A GLOBAL CPG COMPANY BRANDS – SCIENCE - QUALITY June 2020
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TSX: CWEB | OTCQX: CWBHF
BUILDING A GLOBAL CPG COMPANY
BRANDS – SCIENCE - QUALITY
J u n e 2 0 2 0
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Forward-Looking Information
Certain statements contained in this presentation constitute forward-looking statements and forward-looking information (collectively, “forward-looking statements”). Such forward-looking statements relate to possibleevents, conditions or financial performance of Charlotte’s Web Holdings, Inc. (the “Company”) based on future economic conditions and courses of action. All statements other than statements of historical fact areforward-looking statements. The use of any words or phrases such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”,“should”, “believe”, “will likely result”, “are expected to”, “will continue”, “is anticipated”, “believes”, “estimated”, “intends”, “plans”, “projection”, “outlook” and similar expressions are intended to identify forward-looking statements. Examples of forward-looking statements include, among others, the Company’s assessment of, and targets for, sales of hemp-derived cannabidiol (“CBD”) products, expansion of retail locations throughwhich the Company’s products may be sold, expansion of the Company’s distribution channels, including overseas distribution, development of improvements to the Company’s products and related bioavailabilitytechnology, the isolation of additional cannabinoid products, annual revenue, Adjusted EBITDA, and the Company’s outlook on expected regulatory developments regarding the 2018 Farm Bill, closing of the acquisition ofAbacus Health Products, Inc. (“Abacus”), the impact of the acquisitions on the Company’s business and financial condition, anticipated product category growth, and online sales growth.
These statements involve known and unknown risks, assumptions, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements.
The forward-looking statements are based on management’s current opinions, estimates and assumptions in light of our experience and perception of historical trends, current trends, current conditions and expectedfuture developments, as well as other factors that management currently believes appropriate and reasonable in the circumstances, including, among others, the adverse impact of the COVID-19 pandemic to thecompany’s operations, supply chain, distribution chain and to the broader market for and customers of the Company’s products; the impact of global conditions and unemployment rates on the Company’s stakeholders;general economic and financial conditions; product acceptance and competing products; internet and system infrastructure functionality; information technology security; cash available to fund operations; crop risk;availability of capital; completion of the acquisition of Abacus; the successful integration of acquired businesses; changes in customer demand; and the risk factors described in greater detail in the Company’s annualinformation form dated March 27, 2020, and other public documents of the Company available at www.sedar.com. The Company believes there is a reasonable basis for the expectations reflected in the forward-lookingstatements, however no assurance can be given that these expectations and the underlying opinions, estimates and assumptions will prove to be correct. The forward-looking statements included in this presentationshould not be unduly relied upon by investors.
All of the forward-looking statements and information contained in this presentation speak only as of the date of this presentation and are expressly qualified by the foregoing cautionary statements. The Companyexpressly disclaims any obligation to update or alter statements containing any forward-looking statements, or the factors or assumptions underlying them, whether as a result of new information, future events orotherwise, except as required by applicable law. Investors should read the Company’s public filings and consult their own professional advisors to ascertain and assess the income tax, legal, risk factors and other aspects oftheir investment in any securities of the Company.
Non-IFRS Measures and Industry Metrics
This presentation makes reference to Adjusted EBITDA (as defined below). Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) is not a recognized performance measure underInternational Financial Reporting Standards (“IFRS”). Adjusted EBITDA does not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. The termEBITDA consists of net (loss) income and excludes interest (financing costs), taxes, depreciation and amortization. Adjusted EBITDA also excludes share-based compensation, and share offering related costs, impairment ofassets, and adjustments for fair value of both biological assets and warrant liabilities. Adjusted EBITDA is included as a supplemental disclosure because the Company believes that such measurement provides a betterassessment of the Company’s operations on a continuing basis by eliminating certain non-cash charges and charges or gains that are nonrecurring. The most directly comparable measure to Adjusted EBITDA calculated inaccordance with IFRS is net (loss) income. See “Adjusted EBITDA” in the Company’s most recently available management’s discussion and analysis of financial condition and results of operations available on the Company’sprofile on SEDAR at www.sedar.com for a reconciliation of Adjusted EBITDA to net (loss) income.
Third Party Information
This presentation includes market and industry data which was obtained from various publicly available sources and other sources believed by the Company to be true. Although the Company believes it to be reliable, theCompany has not independently verified any of the data from third-party sources referred to in this presentation or analyzed or verified the underlying reports relied upon or referred to by such sources, or ascertained theunderlying assumptions relied upon by such sources. The Company does not make any representation as to the accuracy of such information.
Some numbers in this presentation may not be exact or add consistently due to rounding.
DISCLAIMERS
Charlotte’s Web, Inc. - Confidential Information
Charlotte is our true north driving our passion and dedication to the best hemp extracts for product quality, safety and consistency.
What began as her story, became the shared story of hundreds of thousands, and the inspiration of many millions more in the journey of their betterment.
C H A R LOT T E ’ S W E B WA S N OT S TA R T E D A S A C O M PA N Y,
I T WA S S TA R T E D A S A M I S S I O N
Founded in 2013Boulder, Colorado
3
#1 BRAND IN THE TOTAL HEMP-DERIVED
CBD MARKET 1
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OUTPACING THE INDUSTRY WITH 2019 REVENUE GROWTH OF
36%year-over-year2
14.7 3
40.0
69.5
94.6
2016 2017 2018 2019
CHARLOTTE’S WEB ANNUAL REVENUE ($MM)
(1) By market share Company estimates (2) Represents 2019 growth over 2018(3) Charlotte’s Web, Inc. revenue
Quarterly Performance – Q1-2020
5
7.1
9.1
11.312.5
13.1
17.2 17.7
21.521.7
25 25.1
22.821.5
0
5
10
15
20
25
30
Q1 Q2 Q3 Q4
2017 2018 2019 2020
All revenue in USD $MM
➢ Organic consolidated revenue of $21.5➢ 70% gross margin➢ Adjusted EBITDA loss of $5.7M➢ $53.0M cash, $114.9M working cap
4-Yr Quarterly Revenue Growth ($MM)Q1- 2020 Financial Highlights
Q1- 2020 Business Highlights
➢ DTC sales increased 29% YoY, offsetting a 32% decrease in B2B sales
➢ 66% revenue from DTC ➢ Signed on first national pet retailer➢ Nearly 12,000 retail doors➢ J.P. Morgan engaged for commercial banking services
and $10 million line of credit (extendable to $20M)
BALANCE SHEET & CAPITALIZATION
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CAPITALIZATION MAY 12, 2020
Basic Common Shares Outstanding 71,945,914
Proportional Voting Shares (400:1) 92,455.575 (400:1 = 36,982,230)
Effective Basic Common SharesOutstanding
108,928,144
Options & Warrants 6,437,040
Fully Diluted Shares Outstanding 115,365,184
BALANCE SHEET MARCH 31, 2020
Cash $53.0
Working Capital $114.9
Total Assets $190.2
Total Liabilities $62.5
Shareholder Equity $127.5
All figures shown in millions, US$
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OVERVIEW
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DYNAMICOPERATING
ENVIRONMENT
EVOLVINGTO SUCCEED
CHARLOTTE’S WEB
ADVANTAGE
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CHARLOT TE’S WEB ADVANTAGE
1. BRAND STRENGTH
2. VERTICALLY INTEGRATED SUPPLY CHAIN
3. INNOVATION, SCIENCE, SAFETY
4. MANAGEMENT TEAM
ADVANTAGE - BRAND STRENGTH
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AWARENESS
SATISFACTION
Charlotte’s Web is #1 in awareness
Charlotte’s Web is #1 in converting awareness to loyalty
Charlotte’s Web is #1 in satisfaction
Charlotte’s Web is #1 in intent to repurchase
Charlotte’s Web is #1 in willingness to recommend
Ratings provided by respondents who have purchased the brand
Source: Brightfield survey of 3500 people who have used CBD in the past year. Respondents rated brands they had purchased. Sept. 2019
CHARLOTTE’S WEB IS #1 IN MARKET SHARE
ADVANTAGE - VERTICALLY INTEGRATED SUPPLY CHAIN
IN-HOUSE EXTRACTION
WAREHOUSE & DISTRIBUTION
PROPRIETARY GENETICS
LONG-TERM CULTIVATION PARTNERSHIPS
PRODUCTION
HARVEST & PROCESS BIOMASS
• Quality, consistency and trust
• Traceability of ingredient streams
• Transparency of the manufacturing process
• Grown in the U. S. A.
• Production Cost Advantages
• Over 50% crop acres certified organic with remainder transitioning
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ADVANTAGE - INNOVATION
Note: Product offering as of Q1, 202011
12 Canine Products – NEW 20193 Gummies – NEW 2019Original Portfolio
ADVANTAGE –LEGIT IMIZ ING THE SCIENCE & DATA
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Launched CW Labs - February 2020
• Co- located in the Hauptman Woodward Medical Research Institute in Buffalo, NY and 700 Tech in Boulder, CO
• Taps into the SUNY System – 64 Connected Campuses across New York
• Developing products using a scientific and clinical data-driven approach
• Building the toxicity and safety data the regulators are looking for
• Safe formulations of well-characterized and specifically defined proprietary Hemp Plant profiles designed to meet regulatory agencies’ standards for clinical research and to ensure cGMP quality standards
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ADVANTAGE - TESTED. CERTIFIED. SAFE.
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All Products Tested up to 20 Times• Testing through entire cultivation, extraction and manufacturing to final packaged product
• Includes 60-panel toxins test
• Batch test results available for every item sold
Certified • FDA approved cGMP certified facilities
• NSF International’s dietary supplements Good Manufacturing Practice (GMP) registration
• GRAS (generally recognized as safe) status for full spectrum hemp extract
• Hemp Authority certified products
• NASC certification for pet products
Deanie ElsnerCEO• Kellogg’s• P&G• Kraft• Johnson & Johnson
Russ HammerCFO• Caleres Brands• ORBITZ INC• CROCS INC• MOTOROLA
Tony TrueCHIEF CUSTOMER OFFICER• PHARMAVITE• WhiteWave• Kellogg’s• Pepsi• Johnson & Johnson
Paul LanhamDTC / CIO• J.Jill• CROCS• Rally House
Jared StanleyCHIEF CULTIVATION OFFICER
ADVANTAGE
M A N AG E M E N TT E A M
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Nathan GerhardtLEGAL/REGULATORY• OMEGA PROTEIN• NW Natural
Cory PalaCAPITAL MARKETS• e-vestor• TMX/Equicom
Tim OrrR&D INNOVATION• Johnson & Johnson• Abbott Laboratories• Kodak Healthcare
David PanterCOO• Estée Lauder• Luxottica Retail• Campbells• Tyco Healthcare
Tamarah SaifTALENT MGMT• Green Chef• Adecco Group
Kelly SheaGOV’T RELATIONS, COMMS, CSR• Danone• WhiteWave Foods• Horizon Organic
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DYNAMIC OPERATING LANDSCAPE
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1. LACK OF REGULATORY CERTAINTY
2. OVER-CROWDED NATURAL RETAIL CHANNEL
3. FDM CHANNEL DEVELOPING
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EVOLVING TO SUCCEED
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1. F ILL THE PORTFOLIO GAPS
2. SCALE THE PORTFOLIO
3. EXPAND & AUTOMATE DISTRIBUTION
4. INCREASE ECOMMERCE CAPABIL ITY
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EVOLVE – F ILL THE PORTFOLIO GAPS
Portfolio Gaps
1. Accessible Price Points
2. Competitive Price Gaps
3. Topical Portfolio Development
Action
Launch Trial Sizes
Price Deal Re-alignment
Launch New Topicals
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EVOLVE – SCALE ACROSS CHANNELS
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Intent to Acquire Synergy
Consumer Portfolio
Health Care Practitioner Portfolio
Scale
*Nielsen YTD 2020
11,675
Doors
12,000
Doors~15,000Unique Doors
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EVOLVE - EXPAND & AUTOMATE
In-House Production
• New 137,000 sq ft cGMP grade manufacturing and R&D facility
• Extraction, production, distribution and R&D expansion
• CPG & Ecommerce shipping and distribution
• Staged build-out thru 2020 –– Pilot in progress, shipping end of Q2
• Capable of servicing the full F/D/M retail channel
Rigid Quality Management
• Leading CO2 and alcohol extraction technologies
• Proprietary Extraction and Isolation Processes
• Current Good Manufacturing Practices (cGMP) Certifications
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EVOLVE – INCREASE ECOMMERCE CAPABIL ITY
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BUILDING CAPABILITIES
• New Technical Platforms• Superior Analytics• Breakthrough Insights• Advantaged Segmentation• Personalized Communication• Rapid Test & Learn
KPI’s
• Traffic• Conversion• Average Order Value (AOV)• Retention
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SUMMARY
• M A R K E T S H A R E L E A D E R
• E X P E R I E N C E D C P G L E A D E R S H I P T E A M
• E V O LV I N G T H E P O R T F O L I O , I N F R A S T R U C T U R E A N D C A PA B I L I T I E S
• B A C K E D B Y S C I E N C E A N D D ATA
• B E S T P O S I T I O N E D T O N AV I G AT E T H E O P E R AT I N G L A N D S C A P E
• F U L LY C A P I TA L I Z E D T O E X E C U T E O N O U R S T R AT E G Y
Charlotte’s Web, Inc. - Confidential
Information
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TSX:CWEB | OTCQX:CWBHF
Charlotte’s Web Holdings, Inc.1600 Pearl Street
Boulder, Colorado
USA
www.charlottesweb.com
Cory PalaDirector of Investor Relations
(720) [email protected]
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